MegaBrew: Bud may be India winner

The $275-billion merger in the making between the world's top brewers - some are calling it the end of history in brewing M&A - will create a combine which is either a leader or a strong number two in most markets.Boby Kurian | TNN | September 21, 2015, 08:48 IST

FILE PHOTO: The $275-billion merger in the making between the world's top brewers - some are calling it the end of history in brewing M&A - will create a combine which is either a leader or a strong number two in most markets. (Thinkstock photos/Getty Images)BENGALURU: A potential 'MegaBrew' between AnheuserBusch InBev and SABMiller will give Budweiser, one of the world's largest selling beers from the AB InBev stable, a promising Indian summer. The deal may also provide SABMiller a chance to discard the tag of being a perennial laggard in the country.

The $275-billion merger in the making between the world's top brewers - some are calling it the end of history in brewing M&A - will create a combine which is either a leader or a strong number two in most markets. But India is perhaps an exception here.

ABInBev and SABMiller will together have 26% share of domestic beer sales, nearly half of market leader United Breweries (UB), makers of Kingfisher beer.

Industry data suggests that India's beer market, reporting compounded annual growth rate of 8% in the past years, is around 280 million cases (of 6.8 litre each). UB, jointly owned by Heineken and Vijay Mallya, sells about 140 million cases. SABMiller's depletions were approximately 65 million cases, while ABInBev's at slightly over 6 million cases.

But the silver lining is Budweiser with a potential to fire up SABMiller in search of a big winner. Budweiser has waited patiently on Indian beer racks to emerge as the largest selling international lager, and can thrive on wider distribution and manufacturing footprints. It fits well with SABMiller's Indian portfolio, which includes Haywards 5000, Knock Out, Foster's, Miller and Peroni.

Gaining access to SABMiller's 10 owned breweries will help Budweiser, which has also rolled out a stronger brew in sync with local preferences, in managing inter-state operational complexities, which holds back many global brands in India. "ABInBev is a global leader backed by savvy investors. SABMiller has pan-India distribution and an experienced team. The combo will straddle portfolio of global brands and claim the right to win in huge Indian market," said Sanjay Jain, director at Taj Capital, a New Delhi-based investment advisory.

The possible merger will help SABMiller fend off the challenger in Carlsberg, the most aggressive global brewer in the country. The Danish beer giant has made heavy greenfield investments tracking volume sales of 32 million cases annually, most of which coming from Tuborg, which possibly counts India as its biggest market.

"With 90% of Indian beer market falling into the hands of global companies, we can expect fundamental changes including move towards premiumization and improved profitability," Taj Capital's Jain added.

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